Construction insurance market trends: Central and Eastern Europe

Construction All Risks

Construction All Risks

Prices decreased further with insurers continuing to see this line of business as one that will – despite pricing – contribute to their margins. Capacity remains abundant for regular construction works such as buildings, roads and bridges. Only the more demanding projects which are  regularly excluded from treaties, such as wet risks or tunnels, remain reserved for selected specialised carriers. Overall, rates tend to follow the path of the prices in general property insurance with only a marginal mark up for the increased risk and additional cover provided by construction wordings.

Low claims experience and – compared to other regions in the world – comparably low exposure to NatCat perils together support the pricing position. Attractive reinsurance conditions also mean larger losses are not immediately relevant for the pricing decision of local insurers who are running low retentions, further keeping prices at the level where they currently are.

Reinsurance pricing is expected to firm up slightly in the mid-term. The impact on construction companies will be dependent on the insurers approach to passing any increased costs on to the ultimate insured.

In markets such as Romania, Czech Republic and Poland, we see the increased demand for long durations in extended maintenance covers for periods such as 60 months, in some instances bordering to what markets for Inherent Defects Insurance would more appropriately be looking at on a stand-alone basis.

Construction Liability

Construction Liability

Construction Liability rates still softening, although it appears to be reaching minimum levels. Due to excess capacity and low cost of capital excess liability placements are increasingly being used as cost effective complement to reach the required limits of indemnity.

The limits purchased across the region are in the small to medium range when compared to international standards. The current liability regime and costs of claims, both, with respect to third party damage as well as Employer’s Liability n tend to drive the limits The focus locally is more on low or no deductibles.

Professional Indemnity

Professional Indemnity

Effects of compulsory insurances, for instance in Romania and Czech Republic, have consequences on the market with an increased demand for higher sums insured.

Principals and authorities have an increased awareness of the risk involved and appropriate sums insured to be procured.

Overall, there is a stabilisation of prices as insurers are undertaking a more selective underwriting process.

Motor, Plant & Equipment

Motor, Plant & Equipment

This line has been one of the most stable ones for a long period of time as a result of the spread of risk and stable pricing. The pre-eminent way of insuring across the region is still as part of a project cover and not in form of annual covers.

Due to the property insured and loss experience the market is giving more consideration to the conditions of plant and machinery which is subject to considerable wear and tear in the course of normal operation.

More exposed and specialised machinery such as tunnel boring machines continue to be challenging with selected insurers and reinsurers declining to cover machinery breakdown.

The recent serious loss experienced in Germany in underground construction has been absorbed by market and has not had an effect on risk appetite to date.

Marine

Marine

The business in this line remains volume driven. Rates continue to stagnate at very low levels.

Project covers often include a limited marine cover, blurring the lines between pure marine and inland transit covers.

Exposed risks such as maritime transport of critical machinery - such as TBMs, electromechanical parts of renewable energy projects or offshore projects - continue to be the subject of close scrutiny.

D&O Liability

D&O Liability

The market is still trying to grow and therefore looking more actively at offerings for small and medium enterprises.

Overall, price remains competitive and conditions continue to be very wide, irrespective of increasing loss experience.

Markets are cautious with respect to the construction sector as a whole and scrutinise track records and backgrounds of both the insured persons and companies.